The IKEA India experience, strategies and future plans

Finally, the wait is over! IKEA, the world’s leading Swedish home furnishing retailer has opened the doors of its Hyderabad store for customers on August 09, 2018.

The brand is counting on 15 percent growth year-on-year easily on same store basis because the interest in Life at Home will grow

Expressing joy, Peter Betzel, CEO, IKEA India says, “At IKEA the people, the community and our contribution to safeguarding the health of the planet is the biggest priority. Over the last five years Juvencio Maeztu and the team here have laid a very strong foundation and a solid base for IKEA to be successful. I thank all our friends in India including the government and officials for all the support and partnership to make this dream a reality.”

This is a landmark moment for IKEA after it got FDI approval in 2013 that allowed 100 percent FDI for single brand retailers in India. IKEA has been sourcing from India for its global stores for more than 30 years. Its plan to open retail stores in 40+ cities across the country, reinforces its long-term commitment and deep connection with India. IKEA has set out to become a truly unique, meaningful and trusted brand in India, making every day brighter and better for the many people.

Jesper Brodin, CEO, IKEA Group, says, “It is a proud moment as it marks a major milestone in a journey that started more than 30 years ago when IKEA partnered up with local manufactures in India. We have a long-term commitment to India, which is an important market for us. We bring an inspiring, affordable and convenient home furnishing offer and awe are more than ready to meet and understand the needs, frustrations and dreams in the everyday lives of our customers in India.”

Resonating Brodin’s thoughts, John Achillea, IKEA Hyderabad Store Manager, says, “I am excited to throw open the doors of the first IKEA India store to the many people of Hyderabad and its neighbouring community. Telangana has given us a lot of love over the last few years and now we hope to witness the people of Hyderabad truly enjoying our store that has been built with love. I thank the local officials who have made this day possible. The biggest value we bring is to the many people who have big aspirations for their homes and thin wallets. Our promise is one of value, of quality and of making the everyday life better at home for all of the many people in the state and beyond.”

Store Concept

The store is 4,00,000 sq. ft. large and is spread over 13 acres in the heart of Hyderabad’s tech hub HITEC City and promises to be a ‘fun day out’ for the family. It offers 7,500 affordable, good quality, value for money home furnishing products, all under one roof.

The IKEA store in Hyderabad offers ideas, inspiration and solutions. It exhibits two full homes that reflect ‘Life at Home’ in Hyderabad, besides different room sets based on different parts of the home like bedroom, kitchen, children’s room and living room. It also has a market hall where you can find home kitchen utensils and accessories, textiles, rugs, lighting, decoration, stationary and even live plants.

According to Patrik Antoni, Deputy Country Manager, IKEA India, “The strength of IKEA Hyderabad is that we have brought all the global IKEA concepts here. We have not compromised on anything. We have got the great experience that we are known all across the world – the inspiration, the customer service, the range – all this has come with us.”

“What we have done special is that how we have composed the products in the room settings. What we are trying to do is to be relevant for the local market. We have done around 1,000 home visits and research was based on how people live and how they want to live and then we are putting our products in a unique way that represents the Indian needs. If you compare the rooms in IKEA Hyderabad to IKEA Sweden, the main difference is how the rooms are composed and products are composed,” adds Antoni.

On the basis of visiting 1,000 homes in India, Christian Kampe, Sales Manager, IKEA India has narrowed down living room and kitchen categories contributing major chunk to the sales.

IKEA is planning to change around 25 percent of the entire range every year.

Low Pricing

IKEA’S business idea is based on ambition of reaching the many people with thin wallets. As it sets a goal to reach 200 million people in the next three years, the foundation for a strong and relevant offer is affordability and accessibility. IKEA will attract the many different segments in society and not just the few. Everyone is welcome to shop at IKEA where 1,000 products are priced below Rs 200.

In terms of the products, the company has brought its classic IKEA range along with a small percentage of locally relevant products for the Indian market like masala boxes, pressure cookers, tawas, idli makers, colourful sheets and mattresses made with coconut fibre centre. Customers will also be able to buy global classics like the Billy bookcase, Klippan sofa, Lack table and POaNG armchair among others.

Scandinavian Designs

IKEA is known for creating a low-maintenance home with a mix of classic Scandinavian design and long-lasting modern furniture. The brand, which is planning to replicate its success in India, just like other countries, has introduced Scandinavian concept to Indians too.

“As you know we have been successful in introducing Scandinavian design in many markets like China, North America, Russia, etc. where Scandinavian design was not known at all. Similarly, we are introducing it here in India too and are hopeful that as Indians are always open to new things they will accept it too,” states Mia Lundstrom, Creative Director, Life at Home, IKEA India.

The common thread behind all IKEA products is their ‘democratic design’. This is a five-pronged idea: Sustainability, form, functionality, quality and price.

“IKEA range in Hyderabad is 90 percent going to be the same as everywhere else in the world. We are playing around for about 5 to 10 percent of the local adaptation or market specific range product,” she adds.

Distribution Centre

In India, the furniture retailer has invested Rs 20 crore for 2.7 lakh sq. ft. distribution centre in Pune, on leased land. This distribution centre is in partnership with IndoSpace Industrial Park and going forward, the brand plans to expand this distribution centre to 3.7 lakh sq. ft. by next year with an investment of Rs. 100 crore.

According to Bimal Patel, Distribution Operations Manager, IKEA India, “Currently, in Pune we have 170 co-workers, and as soon as we launch e-commerce operations, the co-workers strength will go up to 400-500.”

The brand is also scouting for land in Maharashtra to build own warehousing facilities over the next two to three years and has earmarked an outlay of Rs. 750 crore and create direct jobs of approx. 500-600 people along with indirect job creation.

An investment will be done keeping both automation and sustainability in mind where IKEA aims to implement some of the most advanced technology.

IKEA will operate a non-bonded warehouse for domestic goods, and a custom warehouse which will stock imported goods, Patel said.

UrbanClap: Assembly Partner

IKEA has tied up with UrbanClap, a mobile-based services marketplace. As part of this collaboration, consumers purchasing a select range of IKEA furniture from the store can book furniture assembly services via the UrbanClap app or the website.

Patel says, “We want to enable the unorganised sector to develop skills, to enable our customers to build the furniture and that is why we decided to go ahead with companies like UrbanClap where competitors can get trained by us and actually be certified to build IKEA furniture. Interestingly, that creates another economy for the local entrepreneurs to do that and that is a business model that can be expanded across the country.”

IKEA has contributed to the training of the carpenters on UrbanClap’s platform, thereby, skilling them to become professional IKEA assemblers.

Antoni asserts, “DIY or Do it yourself is still a new concept in India and we will invest heavily to provide affordable and quality services.”

The IKEA-trained carpenters are listed on the UrbanClap platform and customers can order their services. To further strengthen the services’ offer, IKEA also has an in-house team of 150 assemblers, of which today 75 are women.

“In IKEA we are extremely transparent with our operations. Customers have power to take the decision if they want to pay for the additional services – delivery, assembly and installation – as these services comes as an additional cost in IKEA’s terms. What differentiates us from other retailers is that we give the customer the choice,” states Patel.

Purchasing Strategy

IKEA has been sourcing from India for more than 30 years. There are more than 50 suppliers in India and IKEA has long term partnerships with many from past decades.

15 new suppliers have associated with the brand in last two years in new categories besides textiles.

IKEA introduced its first TVC in July revolving around the everyday family moments. It very clearly showed the prices of the products as and when they appeared.

According to Ulf Smedberg, Country Marketing Manager, IKEA India, “We mentioned prices in the ad with the purpose to show that the products are nice, high quality and to ensure that we offer affordable solutions.”

He further adds, “When any foreign brands comes to the country, most of the time they are very expensive, that is what we believe that the perception will be for IKEA. That is why, we decided to highlight the affordability factor from Day 1. Be it digital ad, TVC or any other medium to advertise, we have highlighted it everywhere.”

IKEA will be rolling-out new ad campaigns based on different seasons and festivities in India. The next campaign will be rolled around Diwali.

The brand which believes that digital is going to be the effective way of communication in India, plans to engage customers with IKEA family club.

“IKEA family club is for our best customers where we give them something more than points. We give them benefits, invite them to home furnishing classes and they can also follow us and be the first to buy during different campaigns. We are building this relationship with our future customers,” asserts Smedberg.

IKEA Restaurant

The store houses a 1,000-seater restaurant, IKEA’s largest and possibly India’s largest restaurant, a cafe which offers coffee, bakes, frozen yogurt and many more for purchase.

The IKEA restaurant offers 50 percent Swedish specialities like salmon and chicken and vegetarian meatballs and 50 percent local delicacies like biryani, samosas, dal makhni in the case of Hyderabad. The food is very affordable, for example a plate of samosas cost Rs 10.

According to Henrik Österström, Country Food Head, IKEA India, “The reason for our association with food goes back quite some time. As far back as in 1959, when we opened the first store in a small village in south Sweden, our founder Ingvar Kamprad had said that it is difficult to do business with hungry customers. His observation is valid even today when we have huge showrooms in various markets across the world.”

He further adds, “Back at that time, our founder realized that people used to leave the store after shopping for some time. They did not come back because they went out to eat something. So, the idea was born that we need to have our own restaurant to keep the people in the store and to give them something nice to eat.”

Globally, the restaurant business accounts for 5.4 percent of the total revenue of IKEA whereas in India, the furniture giant is expecting the restaurant to contribute 10 percent of the total revenue. According to Österström, the cost of food for two at the IKEA restaurant is somewhere around Rs. 250.

Hiring Policies

The IKEA store employs 950 co-workers in Hyderabad directly and 1500 indirectly in services and expects to host close to 7 million visitors each year.

Going forward, each IKEA store in India will have between 800-1,000 co-workers and about 1,500 workers indirectly engaged in services, which makes a total of approximately 2,300 employees per store.

Elaborating on the recruitment plans for India, Anna-Carin Mansson, Country Head – HR, IKEA Retail, says, “IKEA will hire 50 percent women co-workers at all levels, this translates to about 7,500 women co-workers by 2030. We will empower and nurture them to grow with IKEA and create suitable work conditions to retain them.”

The ambition for IKEA in India is to develop a 50:50 gender diversity, encourage and create unique opportunities for women in society. Towards this, the brand has a non-negotiable commitment to hire 50 percent women co-workers at all levels in India including forklift drives and assembling co-workers.

IKEA aims to provide more opportunities to women in different life situations through flexible work hours, possibilities to choose suitable jobs, child care facilities at the work place and by securing a healthy and safe environment.

“IKEA also wants to bring back women who have taken a sabbatical and dropped out of the workforce due to marriage, child birth etc. We want to be known as a workplace preferred by women who today hesitate to join back work due to many reasons such as lack of professional trainings, societal concerns and safety issues,” Mansson states.

IKEA has a unique hiring process as the brand believes in value base hiring and give priority to individual’s values more than their experience and degrees.

Expansion Plans

In the next phase of expansion, IKEA will be present in other cities like Ahmedabad, Surat, Pune, Chennai and Kolkata with a multi-channel approach. By 2025, the brand is looking at opening more than 25 touchpoints across various cities.

“IKEA Hyderabad is a large store as comapred to many of our other stores across the world. When we enter Mumbai, we want to enter as a multi-channel retailer. Going ahead, we are looking at a store giving a same brand experience, a number of smaller format stores, which will still be big stores, where we can get closer to the customers in the city centres and then an online experience also that gives customers an opportunity to meet IKEA whenever, wherever and however they want,” reveals Antoni.

The brand aims to be present whenever the customers wants by various channels like on-line, smaller touch points and large IKEA stores.

Antoni says, “We see that Indian market holds a lot of potential for brand IKEA. We do not see India as a country, but we see it as a continent with a lot of people and lot of needs. We see a lot of micro-terms that will support us along with other retailers. It is a growing economy, maybe we might be a little bit bumpy initially but over the coming years India will grow from strength to strength as an economy.”

He further adds, “We see it as a young country with almost 500 million people below 25 and they will need new homes, we also have a strong observation that people who will shift cities will also need new homes. Then we are very excited about India in the sense that people love homes and it is not the same in the other Asian countries where people many times celebrate outside the home. While in India, it is family, friends, festivals and all over the food, so the four F’s drives life at home and there cannot be a better place for a home furnishing company to be.”

IKEA is looking forward to spending Rs 1,000 crore per store. So far, the brand has spent half of the Rs 10,500 crore that was approved as initial investment in 2013.

IKEA is focusing big on healthy and sustainable living. The brand’ ambition is to provide affordable good quality, value for money and well-designed home furnishings to many people.

Going forward, IKEA is looking forward to opening all the stores with plot size between 8-11 acres.

The brand is counting on 15 percent growth year-on-year easily on same store basis because the interest in Life at Home will grow.

“More the interest in Life at Home will grow in India, more players will enter India and then the market will grow. This is just a beginning of a new era,” Antoni concludes.